Stephen Zubiago, Health Care Partner at the law firm Nixon Peabody, talks about what to expect in an unexpected world

A health care partner in the local office of a national law firm, Nixon Peabody, offers his insights into how the disruptions caused by the COVID-19 pandemic will change the future health care landscape in the state and the nation.

The questions that need to be asked

With elective surgeries being pushed aside by the crush of urgent coronavirus pandemic demands, will hospitals and health systems be forced to change their business models? What is the role that journalists need to play in reporting on the coronavirus pandemic when nurses, doctors, and even naval commanders can be fired for telling the truth about conditions they are facing in their jobs? When will Gov. Raimondo open up her news conferences to allow for follow-up questions with reporters? What are the most important stories to tell about how innovation and improvisation are improving the delivery of health care in a time of pandemic?

Under the radar screen

The recent announcement by the R.I. Office of the Health Insurance Commissioner to reach a settlement with UnitedHealthcare regarding problems with its insurance coverage for mental health and behavioral health conditions, and with it, a decision to launch a new fund managed by the Rhode Island Foundation to respond to mental health issues related to the COVID-19 pandemic, raise a much more fundamental question about the need for a systemic regulatory approach to disparities in rate reimbursements by insurers for mental health and behavioral health services.
The penalties assessed by OHIC can be seen as the cost of doing business, rather than a deterrent to apparent market manipulation. Even as the R.I. General Assembly struggles with finding a solution to how it will conduct business in the current disrupted environment, the opportunity is there for the legislative commission being led by Sen. Josh Miller to draft new regulatory mechanisms for state review of reimbursement rates.

PROVIDENCE –Disruption is the watchword of our times, as almost every part of our world scrambles to adapt and adjust to the rapid, urgent changes in our lives brought about by the coronavirus pandemic.

ConvergenceRI recently reached out to Stephen Zubiago, Health Care Partner and Department Head of Business & Finance, Nixon Peabody LLP, to share his insights about how the landscape of the health care industry in Rhode Island and the nation is quickly changing, looking at both the short-term and long-term outcomes and consequences wrought by the COVID-19 pandemic.

ConvergenceRI: As a law firm deeply immersed in the commerce of health care, how has the landscape changed – for you as a law firm and for your clients? How has the need to move to a virtual, online method of communication changed your business strategies and practices?ZUBIAGO: The health care landscape has changed dramatically in the last three weeks. Many sectors of the health care system have pivoted to focus on COVID-19 services, including hospital systems and hospitals. On the other hand, other sectors, mostly specialty providers of non-emergent services, have substantially cut back services or even closed.

The dichotomy is tremendous: hospital systems and hospitals are strapped for staff, supplies and space while ambulatory surgery centers are mostly idle. Many physician specialties, including cardiology, orthopedics, gastroenterology, urology, and ENT have cut back on services, due to patient’s being subject to travel restrictions.

Some physician specialty practices have transitioned to providing some services via telemedicine. Many of these physician specialty practices had been slow and reluctant adopters of telemedicine. However, many of these practices have quickly adapted as a means of continuing patient care and generating some revenue in order to keep their practices open.

With regard to Nixon Peabody, we instituted a work-from-home policy for all employees on Monday, March 16, well in advance of Gov. Gina Raimondo’s order. All our staff [including attorneys, practice assistants, professional staff, etc.] have laptops and a telecommunications system that allows us to answer calls to the office on our computer.

We are open for business and are fully operational. Our attorneys continue to counsel clients on all facets of the impact of COVID-19 and the efforts to stimulate the economy.

We are very lucky to be in a position to continue to serve our clients during these unsettling times. In addition, our firm has assembled a Coronavirus Response Resource Center & Team.

We are actively providing guidance to our clients as they lead their organizations through this unprecedented pandemic on a wide range of COVID-19-related issues, including: health care; workplace/facility safety; employment; benefits; contract disputes; and education matters.

ConvergenceRI: Earlier this year, you had planned to convene a conference with J.P. Morgan focused on health care in Rhode Island. That conference has now been postponed. What do you see as the most important conversations that need to happen in Rhode Island about the future of health care?ZUBIAGO: Yes, unfortunately we decided to postpone our May 20 conference given the current COVID-19 situation.

The roundtable was intended to focus on health care issues at both the federal and state levels, providing a general political landscape overview and changes in Washington, as well as the impact these changes will have on health care providers in the Rhode Island market.

We are hopeful to be able to reschedule this program in due time, which will now look to incorporate how this pandemic has affected the health care industry.

ConvergenceRI: What kinds of investments do you see as critical to be made in supporting the public health infrastructure in Rhode Island?ZUBIAGO: In the short term, the federal government and state governments have to support hospitals, which will be the backbone of care for COVID-19 patients in April.

Last week, the federal government approved a $2 trillion stimulus package that includes $100 billion for hospitals and other health care providers.

But at this time, it is not clear how much of those funds will go to hospitals or when the hospitals will receive it. The American Hospital Association has asked for $23 billion to be sent to hospitals immediately and that each licensed hospital receive $25,000 per bed.

Next, medical practices can receive immediate support pursuant to the Coronavirus Aid, Relief and Economic Security Act [the CARES Act], under a number of options.

They include Small Business Association [SBA] Loan Program assistance. SBA loans are available for small businesses with less than 500 employees.

The SBA Loan Program allows qualifying small businesses to apply for small business loans up to the lesser of $10 million or 2.5 times the average monthly payroll.

SBA express loans are available in an amount of up to $1 million until December 31, 2020. After such date, the maximum amount available for an express SBA loan will revert back to $350,000.

Funds may be used only for payroll, including vacation, parental, family, medical or sick leave, insurance premiums and retirement benefits, mortgage payments [other than principal], rent, utilities, and any other interest on previously incurred debt.

Until June 30, 2020, no collateral or personal guarantees are required for loan borrowings.

Here are some key takeaways about such loans:

• Loan forgiveness. These are subject to certain deductions due to a reduction in a number of employees and/or employee compensation, indebtedness may be forgiven, up to the principal amount of a loan, equal to the amounts paid during an eight-week period for payroll, utilities, rent, and mortgage obligations [other than principal].

• Economic Injury Disaster Loan emergency grants. For small businesses eligible under the SBA Loan Program, such businesses are also eligible for a grant in an amount up to $10,000, to be advanced prior to the distribution of the full loan amount.

In the mid-term, nursing homes, and other providers of health care to seniors will need support, as this vulnerable population will have exacerbated health care needs in the near future.

Longer term, the COVID-19 crisis could be the impetus for an expansion of telemedicine as a means of providing cost effective health care services to larger segment of the population.

ConvergenceRI: How important is it to access accurate, in-depth reporting and analysis about health care in Rhode Island during the time of the COVID-19 pandemic? What are your go-to sources?ZUBIAGO: In times of a health care crisis, accurate, reliable information is of paramount importance. And citizens have to get the information from an organization or person that they trust. And that trust has to be earned.

Unfortunately, for a variety of complex reasons, there are few or no news organizations many individuals trust.

But certain individuals can and do, and recently the public figures who I believe have earned that trust are: Dr. Anthony Fauci and Dr. Deborah Birx at the federal level; and Gov. Raimondo, Dr. Nicole Alexander Scott, director of the R.I. Department of Health, and Dr. James McDonald, chief medical officer at the R.I. Department of Health, at the local level.

Of course, publications such as ConvergenceRI provide a current source of valuable content.

ConvergenceRI: In terms of medical devices, how has the COVID-19 pandemic reshaped the marketplace?ZUBIAGO: While I haven’t been focused on that area, my partner Hannah Bornstein is well entrenched in these issues and has provided the following insight: The medical device marketplace has – unsurprisingly – seen numerous disruptions and changes since the outbreak of the coronavirus pandemic.

For example, the FDA has implemented Emergency Use Authorization procedures for in vitro diagnostic testing and personal respiratory protective devices, permitting quick review and authorizations of products urgently needed to fight the virus.

The personal protection equipment and ventilator shortage has had a drastic impact on both approved manufacturers’ supply chains and has seen new market entrants looking to help fill the gap and navigate FDA regulations in doing so.

Yet in looking to increase supply, pricing for numerous products has been challenging, including cost increases for raw materials and components that may affect a manufacturer’s ability to complete contract performance requirements.

These are just some examples within a medical device industry that is rapidly adjusting to the public health crisis and working to navigate daily, if not hourly, changes in various agency guidance and updates from Washington.

Additionally, in certain instances, the PREP Act offers immunity from liability for manufacturers, providers, and others in the supply chain that provide statutorily-defined covered countermeasures in response to the coronavirus pandemic. Medical device manufacturers should take note of this Act when assessing its strategic response to the coronavirus pandemic.

ConvergencdRI: What haven't I asked, should I have asked, that you would like to talk about?ZUBIAGO: Thanks for asking. Here are some other market observations:

• Health insurers are “cash flush” right now because they are not paying many claims and may be looking to purchase medical practices, which right now are distressed.

• “Hospitals will be king,” and federal/state dollars that will eventually flow to hospitals will likely come at the expense of ambulatory service providers. Be on the lookout for consolidation among mental health, substance abuse treatment and developmental disability providers.

• Radiology and ambulatory surgery centers volume vs. primary care volume. Two radiology practices mentioned to us yesterday that they expect to see a rebound in volume [they are down 70 percent and 80 percent right now], as people are simply deferring tests that they will need to have in the near future.

Same thing with ambulatory surgery centers, as they are currently getting clobbered. But the primary care practices are probably not going to see a similar spike in volume. People are not going to double up on physicals.

• Telehealth is taking a giant leap forward and will have a major impact on health care delivery beyond this COVID-19 crisis. Organizations will undoubtedly need to consider shifting from their crisis adoption of telehealth to permanent implementation across their organizations.

• CMS Section 1135 and blanket waivers are bringing much support to frontline health care providers.